Getting into arrears on your mortgage can be a serious business. What can you do should the worse happen and you simply cannot pay the mortgage? Read our quick and simple guide to ensure you don't miss something crucial.
Are you finding the current financial climate difficult, to the point where you have built up mortgage arrears? If so, it is vitally important that you take any measures necessary to resolve the problem. Mortgage arrears are deemed to be a priority debt – i.e. a debt that should be addressed before any others, as it could lead to you losing your home in a worst-case scenario. House repossessions are continually on the increase and to avoid being in this position, you will need to contact your lender or seek financial advice to address the issue.
Many people do not realise how serious mortgage arrears are until it’s too late, but there are a few things that you can do to address the situation before it spirals out of control. The first thing that you will need to do is to speak to your lender (Mortgage Company) about your financial situation. They may ask you to provide them with a Personal Budget Sheet; this is a full list of your incomings and expenditures. By providing these details, the lender will have an overview of your present financial position.
When you are completing your Personal Budget Sheet, don’t forget to include details of any changes in your circumstances i.e. a reduction in wages or benefits, unemployment, illness, the birth of a child or even the breakdown of a marriage of death of a partner. All of these points may be taken into consideration by the lender. After reviewing your current financial position, the lender will then decide how to go about clearing your mortgage arrears. In most cases, they will ask you to pay an additional amount of money towards the arrears in addition to your normal monthly mortgage payment, over a set period (usually 12 to 24 months, but this can differ, depending on your lenders’ rules and the amount you owe).
If you believe that your house is now worth more than the total outstanding mortgage, you must tell them this and request a new valuation, as they may agree to a repayment plan that allows you to pay the arrears off over a longer period of time. Remember – mortgage lenders do not want customers to lose their homes – this is a last case scenario when all other possible measures have been taken. It may even be possible to re-mortgage your home as a way of paying off your outstanding arrears and then commencing with a new mortgage, so always ask your lender for advice before seeking help elsewhere.
If you are still having problems paying back your mortgage arrears, you may be able to get help with your mortgage payments. For example; if you find yourself out of work, any insurance policies that you have can pay your mortgage for a set period of time. If you paid extra on your payment protection insurance, you may even be able to receive back more than your usual monthly mortgage payment amount, therefore helping you to pay back your mortgage arrears until you are back in employment.
Help can also be available from the Department for Work & Pensions (DWP) – i.e. if you are currently claiming JSA (Job Seekers Allowance) following unemployment, you may be able to get help with your mortgage payments. You will need to contact your local Department for Work & Pensions to find out about any schemes that they have running. Alternatively, you may want to consider getting a short term loan to pay off your mortgage arrears. A personal loan can usually be paid back over a longer period of time, so this can be a good solution.